* Coordinated c.bank action eyed after RBA slashes rates
* Aussie, kiwi gain nearly 2 pct vs yen after plunge
* Nikkei trims losses after hitting 5-yr low, down 2 pct
* BOJ keeps rates on hold as expected
By Rika Otsuka
TOKYO, Oct 7 (Reuters) - The yen retreated against other
major currencies on Tuesday after Australia's central bank
stunned markets by slashing interest rates a full percentage
point, stoking expectations that other top central banks could
follow suit.
The Reserve Bank of Australia chopped rates to 6 percent, a
move that improved investor appetite for risk and boosted stocks,
higher-yielding currencies and commodities. []
The yen also edged off a three-year high against the euro and
a five-year peak versus the Australian dollar as some investors
booked profits, believing the panic selling of those currencies
the previous day had gone too far.
"Financial markets are underestimating the U.S. bailout
package and other measures taken by authorities. But as you can
see from market reaction after the RBA's rate cut, risk appetite
will gradually return," said Osamu Takashima, chief currency
analyst at Bank of Tokyo-Mitsubishi UFJ.
Worries that the financial crisis is spreading from the
United States to the rest of the world and pushing the global
economy into a recession sparked a sharp stock sell-off on Monday
as investors rushed to safe havens such as gold, government bonds
and the yen.
The dollar posted its biggest one-day slide since the massive
1998 unwind of carry trades. The high-yielding Aussie, long a
favourite in the carry trade, collapsed nearly 11 percent -- the
biggest drop since the Aussie was allowed to trade freely in
1983.
But on Tuesday, market players hesitated to chase the yen
further, thinking global financial authorities are likely to take
more measures to help restore confidence in the worst financial
crisis since the Great Depression of the 1930s.
"Investors believe global central banks could do anything,"
said Tsutomu Soma, senior manager of foreign assets at Okasan
Securities. "The next step could be coordinated interest rate
cuts, interventions in the foreign exchange market or more fund
injections into money markets. Who knows?"
The dollar climbed 0.9 percent from late U.S. trade to 102.71
yen <JPY=>, moving away from a six-month low of 100.22 yen hit on
trading platform EBS the previous day.
The euro gained 0.7 percent to $1.3581 <EUR=>, up from a
13-month trough of $1.3444 on EBS on Monday after tumbling the
previous day on the decision by leaders of Europe's four biggest
economies against a coordinated bailout plan.
The single currency jumped 2 percent to 139.58 yen
<EURJPY=R>, rebounding from a three-year low of 135.05 hit on
Monday.
The dollar has been boosted as well by the freeze in money
markets that has forced banks to buy much-needed dollars to
settle deals on the open market, hitting a 13-month high against
a basket of currencies <.DXY>.
"Money market rates remain at painfully high levels, showing
the fund shortage problem is still serious," said a trader at a
big Japanese bank. "People have little choice but to buy the
dollar and the safe-haven yen as long as the situation stays the
same."
After the RBA rate slash, Tokyo's Nikkei average <>
trimmed losses to be down about 2 percent after sinking below the
psychologically important 10,000 level to a five-year low in
early trade.
The market shrugged off the BOJ keeping rates on hold, with
few market players expecting Japan to join any coordinated rate
cuts because its short-term rates are already so low at 0.5
percent.
The Australian dollar soared 2.3 percent to 74.42 yen
<AUDJPY=R>, rebounding from a five-year low of 70.27 yen hit on
Monday, as the RBA rate cut boosted hopes for an improvement in
investor risk-taking.
In the six trading days to Monday the Australian dollar had
plunged more than 16 percent against the yen.
Against the dollar, the Aussie edged up 0.6 percent to
$0.7245 <AUD=D4>
(Additional reporting by Hideyuki Sano; Editing by Hugh Lawson)
